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September 7, 2011

German Court Tosses Out Challenges to Greek Bailout

Not a 'blanket' approval for participation, court warns

Court challenges to Germany’s participation in the bailout of Greece were thrown out on Wednesday, although the country’s top court warned that it was not granting “blanket” approval, and that the government must seek parliamentary approval for future bailout payments.

Bloomberg reported that the Federal Constitutional Court in Karlsruhe tossed challenges to Germany’s shares of both the current 110-billion-euro ($155 billion) rescue package for Greece and a separate 750-billion-euro Greek rescue fund that was approved last year. At the same time, however, it granted a greater voice in such decisions to Parliament, saying that Berlin must appeal to the parliamentary budget committee on any future such commitments.

Andreas Vosskuhl, president of the court, said in the ruling, “Parliamentary decisions about taxing and spending are a central element of democratic self government under the constitution. As representatives of the people, the elected members of parliament thus also need to remain in control over elementary budgetary decisions.”

Reuters reported that the judge in the case told plaintiffs, "This was a very tight decision. But it should not be mistakenly interpreted as a constitutional blank cheque authorizing further rescue measures."

While some were pleased with the outcome, others were not. German Deputy Finance Minister Steffen Kampeter said after the ruling, “The government already adheres to the requirements to seek approval from the budget committee for new payouts under the rescue fund. The government got full backing from the court.”

But one of the plaintiffs, law professor Karl Schachtschneider, said of the decision, “The court bears the historic responsibility for the destruction of the euro—and even more so: for the destruction of the EU. The ruling is a blow especially for the poor in Germany as the court declines to protect the value of our money, which will hit the poor most.”

Schachtschneider and his fellow plaintiffs, economists Joachim Starbatty, Wilhelm Hankel and Wilhelm Noelling, former Thyssen AG Chief Executive Officer Dieter Spethmann and Peter Gauweiler, a lawmaker from the Bavarian sister party of Merkel’s Christian Democrats, had argued that Germany’s participation in the bailouts undermines the budgetary rights of parliament and violates the right to democratic representation as well as the protection of property.

The battle will no doubt continue, as the German government continues to send mixed messages. Horst Seehofer, chairman of Germany's Christian Social Union and Bavaria state premier, said he could not eliminate the possibility that Greece would be compelled to leave the euro zone. Chancellor Angela Merkel, however, warned that such a move could set off a dangerous domino effect.